Correlation Between Vanguard Small and Dimensional International
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Dimensional International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Small and Dimensional International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Value and Dimensional International Core, you can compare the effects of market volatilities on Vanguard Small and Dimensional International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Small with a short position of Dimensional International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Dimensional International.
Diversification Opportunities for Vanguard Small and Dimensional International
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Dimensional is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Dimensional International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International and Vanguard Small is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Small Cap Value are associated (or correlated) with Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of Vanguard Small i.e., Vanguard Small and Dimensional International go up and down completely randomly.
Pair Corralation between Vanguard Small and Dimensional International
Considering the 90-day investment horizon Vanguard Small Cap Value is expected to generate 1.36 times more return on investment than Dimensional International. However, Vanguard Small is 1.36 times more volatile than Dimensional International Core. It trades about 0.09 of its potential returns per unit of risk. Dimensional International Core is currently generating about 0.1 per unit of risk. If you would invest 15,527 in Vanguard Small Cap Value on July 6, 2024 and sell it today you would earn a total of 4,209 from holding Vanguard Small Cap Value or generate 27.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Small Cap Value vs. Dimensional International Core
Performance |
Timeline |
Vanguard Small Cap |
Dimensional International |
Vanguard Small and Dimensional International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Small and Dimensional International
The main advantage of trading using opposite Vanguard Small and Dimensional International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Dimensional International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dimensional International will offset losses from the drop in Dimensional International's long position.Vanguard Small vs. Vanguard Mid Cap Value | Vanguard Small vs. Vanguard Small Cap Growth | Vanguard Small vs. Vanguard Value Index | Vanguard Small vs. Vanguard Small Cap Index |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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